An Evaluation and Analysis of the Interactions between Human - Resource Productivity, Production Costs and Manufacturing Exports in Iran

The multiple objective of this paper is: 1) to identify the effective determinants of labor factor productivity and 2) to measure the extent of the effect of labor productivity on production costs and export of manufacturing products in Iran. For this purpose, based on (ISIC-2 digit) time-series manufacturing data for (1994-99) period, a system of simultaneous equations system is utilized, using an I2SLS regression technique. The results indicate the education and dexterity level of industrial labor force in Iran has had an appreciable and meaningful effect on labor productivity during the studying period. Moreover, increased labor productivity that was experienced by the industry, has resulted in a reduction in the unit labor cost, which in turn, has led to reduction in average cost of production, making Iranian manufacturing exports more competitive. The results do not show any significant and meaningful effect of manufacturing exports on industrial labor productivity, and thus, gives no support to the "learning-by-exporting" hypothesis. The paper calls for an effective government policy to strengthen the integration and consistency of the industry's labor force education and specialization requirements with the educational programs within the higher education system in order to enhance the international competitiveness of the manufacturing sector in Iran.